Saturday, 15 June 2013

Capitalism Works - Well Of Course! Up To A Point ...

This crisis has proved that capitalism works. The G8 protesters have little support – there’s no public appetite to blame the free market... on the whole they don’t seem to be fulminating about the free market system as such. It’s financial excess that is blamed for our travails, not market failure.

Discuss, as the exam rubric goes. I'll chuck in a couple of thoughts. First of all, I strongly agree with Warner's pivotal statement: "Capitalism is nothing if not supremely adaptable" - which trumps all your leftists and euro-dirigistes every time. But actually, it isn't really just capitalism: it's the whole ruthless 'Anglo-Saxon' policy-making complex that au fond has a stronger grip on how markets actually work, and what the tools and levers are - and isn't afraid to use them. (Bailing out banks isn't intrinsically capitalist at all). Again, these are advantages often not shared by your lefties and dirigistas (although that Mario Draghi seems to know a thing or two).Secondly, he has some sensible things to say about Anglo-Saxon labour-market flexibility - particularly his observation that this has virtually nothing to do with government intervention. At least, not direct intervention in the crisis: there were certainly interventions in the 1980's to diminish the powers of UK unions, for example. The final point though, surely, is that it's not over yet - despite the recent rash of upbeat pronouncements, which seem to me to be premature in the extreme. As Warner says, bailing out banks and printing money "are creating massive distortions that may be piling up problems for the future." Oh yes indeed.

10 comments:

Anonymous
said...

While I agree with the comments about bailing out the banks, what would the state do if, as was said at the time, certain banks were within hours of collapse. Can you imagine the scenes when you'd go to an ATM just to find your cash had gone. It had be paid out as a banker's bonus - a bonus based on questionable derivatives.

Yes it was a bad (political) solution but to the original (political) problem of lack of regulation.

And taking this argument further as an extension of yours, there seems to be no need for politicians as the markets will sort it.

Anon, it could nationalise that bank (RBS, HBOS) and split it into a Good Bank and Bad Bank, as was much discussed at the time. The ATMs etc go to the Good Bank along with the assets that can be valued, the impossible-to-value assets to the Bad. The costs are met, in sequence, by the shareholders, the holders of junior debt and the holders of senior debt. There never was a need to blew huge sums of taxpayers' money on these banks, especially since the Northern Rock fiasco had given HMG many months of notice that trouble was brewing.

Andrew what sort of comment is that. Capitalism has principles, its not a religon. Socialism has more fo an air of religon as it belieives in superior morality of the working class in theory. Capitalism does not it is based on science and human nature; capitalism is darwinist, not religous.

Anon - (1) as Dearieme says, there were other courses of action available: and they didn't need to include putting depositors' guaranteed funds at risk, either

(2) exactly as you say, the basic problem was politico/regulatory failure (since we always knew that all men are grasping rogues when left to their own devices) - i.e., the failure of regulators to ignore Brown + Balls, and do the Right Things

(3) by the stage we'd reached when NR happened, the market couldn't be left to sort it out, an adroit and swift intervention was needed (though the politico/regulatory regime was by then proven useless ...)

(4) for the avoidance of doubt, I personally consider that there are times when the importance, and hence the political imperative, of keeping the show on the road, outweighs 'theoretical' considerations: pragmatism must rule the day and the grown-ups must take charge

e.g. on behalf of pensioners, who are the least able to survive the consequences of a 'cleansing period of meltdown', and who, when faced with being mugged for their groceries in tesco's carpark (from which we are only ever 3 days away from when the s**t really hits the fan) would endorse an erosion of their ongoing lifestyles instead

this is just one lurid example to make the point

capitalism is nothing if not ... pragmatic: and can accommodate periods of dumb decision-making and bad weather, before getting back on with its adaptive thing

Secondly, he has some sensible things to say about Anglo-Saxon labour-market flexibility - particularly his observation that this has virtually nothing to do with government intervention. At least, not direct intervention in the crisis: there were certainly interventions in the 1980's to diminish the powers of UK unions, for example.

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interesting to re read that "" This crisis has proved that capitalism works. The G8 protesters have little support – there’s no public appetite to blame the free market... on the whole they don’t seem to be fulminating about the free market system as such. It’s financial excess that is blamed for our travails, not market failure.""